Celgene Corporation (CELG) Management Presents at 2018 Bernstein Strategic Decisions Conference (Transcript)

| About: Celgene Corporation (CELG)

Celgene Corporation (NASDAQ:CELG) 2018 Bernstein Strategic Decisions Conference May 30, 2018 3:00 PM ET

Executives

Mark Alles - Chairman & CEO

Analysts

Ronny Gal - Sanford C. Bernstein

Ronny Gal

Hi everybody. We are very fortunate to close today with Mark Alles the CEO of Celgene. The way we are going to do this the individual meetings is Mark will say few things from the podium to give a feel for the overall story of - I did not realize this is happening. To give a feeling for the overall story of the company.

And then we'll do a Q&A session. In the Q&A as in all the meetings today you got cards on your table feel free to write your questions raise your hands, someone will pick the card from your hand. Or I'll try to stop during the Q&A and couple of -- to let folks ask question from the audience that they would still like.

So, Mark, thank you very much for being here.

Mark Alles

Thank you. Good afternoon everyone thanks for being here. Ronny thanks so much for the invitation. My name is Mark Alles, I'm Chairman and CEO of Celgene and it's great to be with you to talk a bit about the company. Let me set some context to begin of course we'll be making forward-looking statements today so you should check with our filing with SEC, 10-K other documents so that our actual results will be different from perhaps forecasted results are available to you and the risks associated with our company are well understood.

One of the important aspects of Celgene is that our business model is consistent with our vision and mission as a company. In the world of bio pharmaceuticals in the world of healthcare today typically when you're trying to discover new medicines the value proposition that you bring to the market really is aligned directly with your ability to discover the true innovation. It's always been the case from now 31 years in pharma but more and more of the world is looking at benefit and value in a way that has to be very clear.

So, our mission statement, our vision is to discover, develop, and commercialize those medicines that make a very very big difference in outcomes in the setting of survival and other aspects of cancer and immune inflammatory diseases we see this as an important business model statement as well as our mission and our vision and quite frankly are proud of it and we use it to define how we go forward. At the beginning of the year, we thought about where Celgene is in this continuum of discovery development and commercialization. We thought about our future and we thought about how we could galvanize a strategy for our company around these elements of mission vision.

So, we came up with a framework for our strategy, I want to share that with you now before diving into these three components of execution, acceleration and then an expansion component. If you think about these dimensions or domains, execution is analogous to the commercialization aspect of our mission statement. Acceleration is all about how we develop things, how we make decisions, how we do clinical research, how we work with regulators around the world and on the expansion side it's very analogous to the idea of are you better at discovering and partnering with the ecosystem that you are part of so that you can continue to build a pipeline of the kind of products that the world needs not just incremental benefit.

So, this notion of execute, accelerate, expand is very important strategically for how we organize the company and how we think about priorities at Celgene. Let me start with execution. So, this year we expect strong volume growth driven growth again and have guided to diluted earnings per share of $8.45 this includes the dilution of the Juno deal that we did at the beginning of the year as well as impact by medicines for the molecule Fedratinib, I'll talk about both of those a little bit more in my presentation.

The revenue for the company is expected to grow in the range of 14% off of a very big base to almost $15 billion $14.8 billion REVLIMID of course is the product that is driving a lot of our success in terms of revenue and it's also a focus of investors given that the intellectual property window was starting to come into focus more and more in the early part of the next decade. POMALYST is a very important product for relapsed refractory multiple myeloma. OTEZLA is our flagship drug in our immunology information organization for psoriasis and psoriatic arthritis is a very very successful product we think that we understand the markets much better now than perhaps a year ago this time and look forward to optimizing this molecule.

ABRAXANE is our mainstay in solid tumor cancers approved for metastatic breast cancer, lung cancer and pancreatic cancer it is the standard of care and the developed markets of the world for metastatic pancreatic cancer, but importantly at ASCO this weekend in Chicago a Roche will be highlighting a survival and progression free survival study with their checkpoint inhibitor called centric where the combination of ABRAXANE, carboplatin and centric led to very very strong outcomes for subset of patients called non-small cell lung cancer that's currently not built into any of the numbers we have but we're happy about the data we think that it could be practice changing going forward.

When we think about acceleration I think it's very important for us to set the epidemiology and disease framework for how Celgene focuses its efforts in research and development and commercialization we've talked a lot about hematology in our core areas of multiple myeloma, non-Hodgkin's lymphoma and then the Milo disease area are areas of incredibly unmet medical need but at the same time the prevalent pool of these patients is growing all the time. The unmet medical needs in the relapsed setting provides us opportunities to rescue patients who for example today with myeloma are being treated with REVLIMID in combination with triplets therapies DARs - from Janssen as a combination approach in other triplets.

But this is creating a window where rescuing patients as they progress on current generation products is a major opportunity for drug development and for commercial portfolio going into the future. Our efforts in non-Hodgkin's lymphoma are starting to bear fruit and our partner Juno which is now a wholly-owned company of Celgene and JCAR017 or liso-cel is an important product and I'll mention that again but this is being developed to rescue patients with diffuse large B-cell lymphoma and chronic lymphocytic leukemia, we like the profile and I'm sure Ronny will talk a lot about that during the Q&A. And in Milo diseases the landscape for Celgene from AML through MDS myelodysplastic syndromes is such that we are the world leader in current marketed drugs for these diseases and from a pipeline point of view no one else in the world is even close with the research that we're doing again in all stages of AML, MDS, and myelofibrosis, so it's a combined effort where we think that this opportunity today and in the future is going to be profoundly strong for the company.

In I&I, I mentioned psoriasis and psoriatic arthritis already with OTEZLA. We have a very strong position in the US, Japan, France and other markets around the world and it's still very early in the launch Phase of the molecule. Ozanimod is a product that you may have heard of earlier in the year where we unfortunately had a regulatory misstep in terms of the US FDA and refusal to file for ozanimod in multiple sclerosis. We've talked about this a lot and I'm sure again Ronny will ask me these questions during our session, but we're back on track and expect that in the US we'll re-submit ozanimod for relapsing MS at the beginning of 2019, so Q1 of 19 and we've talked also about the European submission for the same indication in the same time period Q1 of 2019.

This is our flagship product in neuro degenerative disease nor inflammatory diseases and we're very excited about it as we think about as animosity as a platform molecule not only in multiple sclerosis and various stages of that but also moving to inflammatory valve diseases where we're developing ulcerative colitis, Crohn's disease along with OTEZLA for Crohn's disease and once again some of the pressure that's been on Celgene more recently is the failure of GED-0301 a molecule that we acquired and late last year failed in Phase 3 in a Crohn's disease population.

So, while we've had some challenges along the journey to build Celgene, we still think of these markets as high unmet need. The discovery development and commercialization opportunity is quite strong and we feel like we have a good position in each of these categories with not only current generation marketed products, but importantly our next generation pipeline products which I'll talk about in a moment. When I discovered when we talk about discovery and talk about this idea of expanding the company's footprint, we have to talk about organic research and development.

We're very proud of our fanatic centers of excellence that are as you can see on the slide built into four distinct areas protein homeostasis, the function and this regulation how proteins work in disease. We think we have a leadership position worldwide and a core capability that we are beginning to take advantage of epigenetics, inflammatory diseases and then increasingly focus on immune oncology on the left side you'll see a group of eight programs that entered the clinic in 2017 was the third year in a row that our organic research and development apparatus was able to bring it with seven new molecular entities out of discovery and into human testing. So we're now getting into a steady state of discovering new molecular entities to bring it to the clinic in those areas of diseases I already mentioned hematology, oncology, inflammatory conditions and we're even dipping our toe a bit into neural degeneration given that if you understand the function of proteins you should be looking at protein dysregulation, degradation in neurology as an adjacency to what you're doing research and protein homeostasis.

At the beginning of this year, we announced the liso-cel deal, the Juno transaction which was very important in two domains. One is that the future treatment of blood cancers like solid tumors increasingly is based on immunology and the function of T cells to recognize various forms of cancer in the case of Juno and CD-19 directive therapy, we think that JCAR017 is positioned as a potential best in class compared to the first generations that are in the market today. We say that on two fronts, one the data are continuing to maintain a high degree of efficacy including complete responses importantly though the safety profile for JCAR017 compared to the marketed CD-19 products continues to look favorable and importantly gives us an outpatient opportunity that we will see if in fact it holds up. The JCAR017 looks like a very important product for the future. The other aspect of Juno was now Celgene become a shaper of our future with respect to T cell biology. We're not participating, we're actually owning it, shaping it for our own future purposes and this is important in the context of aggregating what's going on in the T cell biology space and the newcomers around the world who have great ideas about how to manipulate T cells for the purpose of treating cancer. So, this puts us in a driver seat as opposed to a passenger seat with respect to immunology and blood cancers.

Fedratinib is a selective JAK2 inhibitor impact by medicines was developing as a spin out of Sanofi this fits directly into the Celgene playbook of high unmet medical needs niche indication of myelofibrosis and it has a dataset completely de-risked in the Phase 3 programs in myelofibrosis patients who are treatment naive is a positive study. So the Phase 3 trial was known when we did the deal and it's supporting the regulatory that we're putting together the other aspect of the data is a Phase 2 trial that works, that shows that the product is promising is the setting of JAK5 or -- failures this is the product that is marketed worldwide by insights and Novartis.

So, we look at this and think that we have a very very nice opportunity to compete head-to-head in the market but certainly to try to rescue patients who have failed all of the therapy we are completing the NDA and expect to submit this to the FDA and European regulators later this year and next year. This time a year ago we completed a deal with our Chinese partner BeiGene for BGB-A317 this is our checkpoint inhibitor, our PD1 checkpoint inhibitor for solid tumor oncology and this was brought in mostly in the thought that we could do original research combining these checkpoint inhibitors in our own immuno oncology center of excellence where our novel agents can be used in combination and rather than depending on the market at large Merck, BMS [ph] we could do organic research with our own checkpoint inhibitor. We also now have pivotal programs ongoing and think that this is a multi-billion-dollar product before we would potentially have a combination approach.

So as I then wrap up my comments and then start discussion with Ronny, let me just talk about the next wave of innovation from Celgene on this last slide, what you see on the left side is our current guidance to 2020 where we are looking to grow on the top line by 14.5% CAGR to a revenue range of $19 billion to $20 billion from the $14.8 billion that I talked about at the start of my presentation the bottom one would grow some 19% CAGR to greater than $12.50 a share. Now this is adjusted from where we were this time a year ago on the back of some of the delays in the pipeline disappointments that the street of course knows all about. But this is still industry leading and we feel confident that we're able to with the mix of things happening at the company deliver that kind of top and bottom line outlook through 2020.

On the right side of the slide you see a composite of 10 molecules, seven of the 10 have come through our licensing and acquisitions and M&A approach using an aggressive approach to capital allocation that looks for science where ever the best science is in our areas of course strength. Starting with hematology, oncology and increasingly immune inflammatory markets. If I look at each of those molecules they represent billion to multi-billion dollar potential and many of them are de-risked. Some of them I've talked about let me just take another minute and make sure that you're aware from this slide and I can summarize how there the rest of them on in relaxing and that has 2 large randomized Phase 3 trials that have profoundly important clinical efficacy safety advantages versus the current marketplace so the Phase 3 program is done and we know the molecule is successful versus interferon in relapsing multiple sclerosis. We need to execute on the regulatory front and then on the commercialization but the molecules already de-risked in terms of its clinical profile.

Fedratinib I already talked about, we have a Phase 3 program that is done, successful and it's the cornerstone of an NVA that's being put together as we speak for myelofibrosis. Liso-cel JCAR017, we completed the pivotal Phase II programs in diffuse large B-cell lymphoma and have begun and are aggressively accruing the CLL program for relapse patience in another high unmet medical need more to come on that in the future. This -- is a molecule that's very important in the study of transfusion dependency for beta thalassemia and also a disease called myelodysplastic syndrome lowers disease. This is partnered with Acceleron, great partner we have a great great approach to how to develop this molecule we are weeks away from un-blinding the randomized Phase 3 program in MDS and beta-thalassemia not months away so this summer will know whether this is the molecule we think it will be and then we think it is a blockbuster.

CC-46 is in Phase 3 for acute myeloid leukemia as a maintenance approach as it's oral small molecule and we're waiting for that Phase 3 trial to read out. bb2121 I'm sure Ronny you and I will talk a lot about that this has been the center of attention member bios or partner with this molecule this approach to treating multiple myeloma there has never been a better product at this stage of development or at any stage of development of multiple myeloma in the history of the treatment of the disease with a median of seven prior lines of therapy, the data that are being generated are profoundly and unprecedentedly good so we'll see if it holds up if that's the case this is one of the ways that we will redefine the treatment of multiple myeloma into the next decade and beyond already talked about 317 or early but we've launched a program and then resume at all and there is one of the very few products in the world in advanced stages of development from glioblastoma multi form a which is the disease that will unfortunately likely claim the life of senator John McCain.

This is one of the highest unmet medical needs of the world this is a validated product and that the mechanism is already well understood. It's a produce some inhibitor like bell Kate in myeloma the distinction here is that the drug actually crosses the blood brain barrier and it does destroy GBM cells so we now have a partnership with the cooperative group in Europe called -- they're moving this the Phase 3 upfront for the treatment of the disease and our focus is to develop that in the relapse studying for GBM on which is again a disease measured in survival by weeks not months certainly not years.

So, Ronny thank you and I thank everyone else for your time and attention today cell gene is a company that is building its future as we speak. We recognized in the last six or seven months some of the risk of what it is to be a big biopharma company with great success with a few molecules and the challenge of building our next wave of innovation so that we can thrive beyond the patent expiry of our of our core molecules REVLIMID.

With that thank you for attention I look forward to our discussion. Take care.

Question-and-Answer Session

Q - Ronny Gal

Okay so, I feel we got about 35 minutes or so. I figured we probably should start maybe with the Washington reforms. I know you've been involved in discussions back and forth and if they look at the proposals being made by the president's ahead of HHS and it seems to be a mixed bag of things that could be positive could be negative, if you got a look at the proposals what are the ones that you are most excited about and what are the one or two that you go, I don't know about that one?

Mark Alles

Thanks. I think at a macro level the news flow from Washington right now almost daily particularly in the last two weeks is that the system as it exists needs to be adjusted, needs to change and the question for everyone is that a regulatory change, is that going to be a legislative change or is that there's going to be some sort of pressure that's exerted on the industry at large. Let me just say that Celgene and Pharma are completely aligned with the administration on the notion that the out of pocket costs to patients continue to rise at an alarming and unacceptable rate so bringing those costs down are very important. So, some of that is structural. We talk about the distribution channel and how PBM's and other parts of distribution are layering in profitability which then often is handled by a patient's out of pocket. Some of that structure has got to change. So, we're all for that and we think that there are some market-based solutions to do that.

What the administration has talked a lot about and Celgene is particularly interested in is the notion of in part the under the protected class categories. So Antineoplastic's being a REVLIMID, POMALYST class that some of the market reforms and negotiation that happen in commercial plans should be allowed to happen in the part D mechanism and so we've been engaged with dialogue about how that might happen you know other aspects of that are to be determined but it's very clear that if some market forces can be brought to negotiating in the protected categories under part D, systems could change prices down out of pocket could happen, rebates could be in fact provided back into patients for out of pocket costs as opposed to going into the system for profitability.

So that's one example. I think other examples that are being thought of through CMS as opposed to the broader mindset medicare is outcomes based contracting, so we think about CAR T Celgene is a company with two in development advanced staged CAR T products liso-cel and leukemia lymphoma and BCMA with 2121. We're engaged in many discussions about a situation that would say with the government or really any payer but we're talking about the government now let's do with share. So, for those patients who don't respond there's no payment because the response rates are so high and durable that the richer makes perfect sense only pay for those people who benefit our friends at Novartis and at Gilead, are actually right now in the market negotiating a lot of these outcomes based approaches call them demonstration projects if you will. We think that when we come to market some of that would have been worked out and of course we're going to engage right away. We're expecting to do that not just in the US but around the world.

I think the last thing that we would agree with. Although I want to be clear under Medicare part B, as in boy there's been a long question about do in the buy and build part of the United States market, so chemotherapy, biologics other places where physicians specialists are buying the products administering in the outpatient setting and getting a markup of 6%. There is a view that that extra reimbursement is driving differentiated practice patterns. I reject that out of hand now are there some doctors in United States who might be persuaded by that of course, I'm not naïve. But is that the norm, absolutely not.

To the extent though that Medicare part B would go from under 106% of a price to 103% percent so cut that by 3% and we think that's going to be a savings or perhaps change a little bit of the prescribing to lower cost drugs versus higher cost drugs I'm all for it to the extent that will happen. My personal bias is that for the vast majority of the market and those places particularly the cancer market where high cost injectables are used in the outpatient setting I don't think it's going to have that much difference these are doctors who are practicing by clinical pathway and payers on the commercial side are already reinforcing clinical outcomes that they reimburse for irrespective of the Medicare part B margin. So, we'll see but am I for it of course, is it going to get rid of some of the excess why not.

So, those are three examples.

Ronny Gal

Got it. One thing I want to ask you about is this issue of allowing states to use to create their own formulas. Does that in any way touches your business my guess is on the cancer side it doesn't really make that much difference. But does it make a difference for the I&I business.

Mark Alles

So, what we're really saying is whether it's a state, the federal government, a commercial plan anyone's who is reimbursing in some way for our portfolio or a pharma companies portfolio. The question really is how much value is the medicine offerings and what are the therapeutic alternatives to whether to state looking at transparency in saying this is how we will reimburse based on outcomes of value commercial plan the federal government. The only way we're not affected by changes like that business the value is so clear that we're not lumped together in some sort of category.

So, let's take REVLIMID again in myeloma. In the part D analysis that's been happening in the protected class of antineoplastic the secretary a couple of weeks ago called out REVLIMID without using the name of the medicine because it's the number one reimbursed products under Medicare in the part D protected category. So of course, it should be called out. Now under any negotiations the question really is would a state with a commercial plan with the government say switch out that value from the clinical outcomes of REVLIMID based treatment for something else.

Well, if we weren't better than something else it doesn't matter whether it's the state, the government or a commercial plan they would put pressure on reimbursing for it at all and for contracting So as you know what that tells us is shifting to the other part of our business. A year ago, year and a half ago we decided to go ahead and really jump into the market for the commercial payers and make sure we discounted to create universal access to the product under the scheme that existed. So for everybody in the audience there was a window where using a Otezla required for some commercial plans stepping through a biologic which meant it probably wasn't going to used.

We wanted to go after the pre-biologic market that's our positioning versus topicals some of the other ways to treat the disease psoriasis and psoriatic arthritis so to do that we had to provide contracting mechanisms and of course now we're very happy that we've done that because we have roughly 80% 85% percent bio stuff free coverage which is now driving the brand in 2018 where in the middle of 17 we had a little bit of a dislocation. One was the market didn't grow based on the assumptions we had, the other was we were still discounting waiting for volume to kick in.

And so, there was a little bit delay but we're very happy that we did that so, it's a different example in a different market where the commercial plans are already dictating access and reimbursement.

Ronny Gal

Got it. So, let's move and ask a little bit about what you already mentioned you had pretty tough six months behind you. So, what have you learned from this? If you kind of think about how you're running the company, how you can make it illustrate, how you think about the risk you have taken what are the big learning process?

Mark Alles

I think the starting point for us is to make sure that when we think about drug development. The complexity across each of the areas that we are in and have core competency in and then other areas that we are entering and or working through that we don't take anything for granted about what we're doing through drug development. There's an accountability in the company in the last six months that has come with some of these learning's.

So, through one example let me just take that for what it represents. So, this was a Phase 2 molecule that came into Celgene through a deal where the upfront was round about 700 million and of course a lot of back-end loaded milestones of royalties based on success. In that circumstance, we got excited about a novel mechanism its nucleotide as you know very very novel mechanism in a model of Crohn. The data set on reflection was sort of narrowly defined. At the time, there was a lot of competition thinking this was going to be a breakthrough for Crohn's and other IBD.

So, we look at it now and say maybe we all should have expected more data before we moved to Phase 3, but another big part of the learning about embedding the thinking about drug development is in the homogeneity and heterogeneity of different diseases so heterogeneity of Crohn's of ulcerative colitis of other diseases that are made up of people 20 years with the disease biologics off and on, topicals off and on you name it. You need a placebo control.

So, if we had to do it over again with all three in one I think we all would have said let's do a round of my Phase 2 using a placebo control. See what we have and either we bring it in that way or we do it on our own before we go to Phase 3 as an example. So, it looks so simple now, but at the time the Phase 2 data were compelling we felt like going straight to Phase 3 made sense. Well we've learned a lot about that sort of risk equation and the steps that are required in heterogeneity like Crohn's, ulcerative colitis etcetera.

So, for example with Otezla, in Crohn's we have a randomized Phase 2 that's placebo control, it's very very strongly positive that informs us about how to go to Phase 3 and we're using that right now as a backdrop that's very different than the cancer market. The cancer market as you all know we're talking about high unmet medical need rescued patients who have no therapeutic alternative and in some respects when you have a new mechanism and a new approach it can be easier because you can define homogeneity much better than you can in some of these other markets.

So, we've embedded in a flatter structure and accountable structure and approach to looking at our high value programs the 10 programs that I talked about today other connections from early research to later stage research business development is part of how we screen for later stage assets and other companies all of this has come together to be much much longer about how to discount probablize and think about how to acquire and develop medicines. Now it's on a huge difference, it's just clear it's much more conscious across the organization. So that's the first thing.

The second thing is this lesson learned about empowerment we have a culture and so we're very proud of it's an owner entrepreneurial culture every employee gets equity in the company we think that's an important. Way of having people sharing the upside but also as we see now sharing the dislocation when things don't go well. So, you don't have to have employees in different part of the company's tied to what the company is doing if they own a stake in it they're already tied to it so that's a very very important part of our culture.

But related to that is the notion of autonomy versus empowerment. When you have a larger organization with a lot happening, going to be very careful that the culture of empowerment doesn't become sort of groups making autonomous decisions and judgments that with little bit more oversight might lead to a different decision. So, without being specific within a couple of instances where maybe a little bit more oversight would have led to a different decision in hindsight and that's what we will twice and significant accountability to make sure that going forward there's that process driven approach for a larger organization, a more mature organization that does that almost guarantees for example we don't have another issue to file.

You and I talked about this last week at a meeting, I've done this a long time. I have been part of a lot of companies. I've managed a lot of medicines. There are not some - files, the first time I've been part of something like that. It's frustrating, it's humbling, it's something that all of us should take and stock up and we're committed to do better.

We also have learned a lot about expectation setting, there's been a five, six year window at Celgene I've been part of it with great people like Bob Hugin and others where we had visibility about our growth profile that we were very bullish about and thought about in very specific ways making sure that we're thinking about the convergence of a number of things that might not go very well and risk adjusting and thinking about that perhaps a little bit more on the conservative side as opposed to the optimistic side we've embedded that thinking as well.

So, for example the last Friday, I show the audience these 10 molecules across the board and that's why I highly what we de-risk. We talk about future revenues and our approach on the back of an infrastructure, a competency, if you want to think about a committed expense base on assets that are already through Phase 3 or improve of concepts these tubes were we know in the cancer space if the therapeutic profile holds up there very likely to be meaningful drugs in hematology.

In the setting of inflammatory valve diseases, we're learning, we're playing all those learnings because we still see that as a very very important area and then take neural degeneration, we're dipping our toe in the water. We're looking very very carefully to build a platform that says if you're experts in protein function you need an adjacency not another therapeutic area but something that loops in to the science you are already doing, so if something's happening you're aware of it and you can jump in if the opportunity presents itself.

So, these are things that I would highlight to answer your question.

Ronny Gal

Got it. So, we got about 20 minutes left and I just want to hit the few therapeutic areas that are critical. So, obviously the in the core off the revenue generation in the company. If you think about the volume growth in the next five years assuming they remain under branded under brand. What drives us and roughly what do you think it would be?

And second, if you can give us like an update on how you think about the IC challenges for those molecules in terms of that the choice there are in front of you?

Mark Alles

The overwhelming upside through the current portfolio of myeloma products, REVLIMID and POMALYST are gains in market share and duration. I think the community at large should triangulate this on the back of that in the last year and a half every novel agent in myeloma starting with DARs from J&J Janssen Genlab has very significantly changed outcomes in combination with REVLIMID early and POMALYST late but that's not the only combination approach complicity from BMS. Kyprolis with Amgen so everything is better combined with REVLIMID or POMALYST in early and late lines of therapy.

That is still relatively new in terms of the aggregate treatment of myeloma in US and Europe is still lagging behind we'll catch up. On top of that market share change, the adjustment in how the disease is treated there is a durability affect. The duration tail is very long and that's already been the story of BMS for more than a decade so that continues. Price is a very tiny contributor in the model. It has always been that way not-withstanding that last year we were aggressive and felt like we had left value on the table and wanted to capture it.

Almost an all in one strategy. The other part is that as you know augments this lymphoma study that we're very excited about coming into the summer is REVLIMID RITUXAN combination versus RITUXAN as a single agent in relapsed follicular lymphoma. If that's positive and we remain excited about its prospects that would establish a new standard of care and relapse lymphoma that today we have essentially zero market share.

Ronny Gal

Obviously, if you think about we're - being $12 billion or so how big that opportunity in follicular lymphoma.

Mark Alles

So, we've talked about an adoption of our squared REVLIMID RITUXAN on the back of positive relapse lymphoma study. Rumor we have the world class trial as well that comes first one later this year but in the 2020 number that $19 billion to $20 billion of revenue we have about $1 billion of sales that would accumulate in that window coming from the lymphoma success. These are important additions to how we think about the 2020 timeframe and then of course it would it would go beyond that is also important because the relapse settings well are squared would be part of the near-term treatments and rescue here comes liso-cel in the same setting for diffuse large B-cell lymphoma and then of course we really don't have any presence in CLL so that would be brand new for us and this would all start this year 1920 and beyond.

On the IP side, you asked about time. I just want to be very very clear in my comment. We're going to defend the intellectual property that we on our shareholders have built over the over the window that these products have been very successful. We have a lot of orange book listings for patents. We perfected the risk management system. Now whether or not someone thinks those patents are valid is a different question. But I'll remind everybody one dose of REVLIMID, POMALYST or -- given to a woman who is in a certain window of fetal growth is enough to cause -- which is a birth defect from -- in the late fifties. We're not about to reduce our standard to sell for example our products to generics for bioequivalence testing. There is no amount of political pressure that's going to have us say that a generic that's looking for samples. And by the way, we have sold our products to generics that meet our reasonable business requirements but no amount of pressure is going to put that at risk. So that's part of the whole IP window is how does one think about this so-called gaming, we're not doing that, we're simply holding onto business standards that protect patients and the safety of patients.

Now on the other side of the composition matter, polymorphs, all of that -- that's a matter of ongoing litigation, so I can't comment about that except to say we're going to defend our intellectual property and much like what happened with Natco, which became Allergan and now Teva owns that settlement, we litigated that for almost five years before we arrived at a settlement. We're not going to do something short of a full defense of our IP.

Ronny Gal

This is -- all drug companies eventually have to go with this issue of end of life litigation because the generic that standard way of the business is post small molecule now increasingly biologics. So I hereby about litigating all this but there is a business decision always comes in the end where the business guys go to lawyers saying, I know you think you've got a wonderful case; there is a business case here to do something. So I kind of look at your rate of cash accumulation between 2020-2021 and 2020-2024, and it's really half of the market cap assuming you retain position on revlimid. And when I think about the value you recruit to shareholders, this is a massive derisking of taking the possibility of an earlier window out versus delaying into 2023-2024.

You always made a deal for generic entry in kind of like that window. Should we think about the other generics approval that look, few people -- folks are willing to wait till 2024, but depends on what they have, this is the reasonable window [ph].

Mark Alles

So just to be clear, I was the business guy on the settlement who walked into the layers and said, maybe on this framework that's been suggested to us there might be a window. So you don't have to convince me about how it goes, one. Two, your scenario is a reasonable scenario but it's not one that I'm going to comment on because I'm not going to comment on ongoing litigation at all. Is it derisking? Sure. But I will also say that every quarter of those cash flows that I can maintain by not settling for terms that would be considered unfavorable in this window where we're building the company is an important aspect of how shareholders should think about cash accumulation, put it on the front end of what you said. A settlement adjusted derisk it that gives up a year or some amount of time of cash flow off of revilement after what we've done to build the profile of the molecule. I'm not sure that's actually in the derisking best interest of shareholders either. One year of free cash flow from revilement is enough for us to do the kind of aggressive BD that we've been doing that won't make a huge difference in our shareholders future.

Ronny Gal

So I think at the end of the day basically it seems like you're basically saying, look, there might be a day -- the day before the trial starts when this decision will push come to shove but there is a great value to waiting with this decision until I have to make it an embedded value as accumulated cash flow. So just sort of…

Mark Alles

I really appreciate what you just said. It sounds like what you said could be true because I didn't say it.

Ronny Gal

Okay, let's talk a little bit about some of the molecules in the pipeline. So the PD-1, we've seen -- I guess just earlier this week, the CD38 combination with PD1, not working so much with a bunch of unexpected side-effects. In liquid tumors, the PD1s have not shown any real material efficacy; and I think there was an article in Journal of Medicine last week showing that CD1 can actually activate virally dependent tumors and create some problems there. So could you want to pop [ph] out the magic that there might have been thought a few couple of years ago? You are coming late into the sale in combination; where is the magic there? So kind of like how do you think is differentiation strategy for you guys versus what exists today?

Mark Alles

Let me set a framework first of all. In the last five years there has been no more important modality for solid tumors than the checkpoint inhibitors. So we ought not forget that we're massively changing survival outcomes in melanoma, multiple cell lung cancer, other diseases that up until the last five years have been death sentence within a year or so; so we're going to start there. You're right to say mechanistically, a lot of things have been tried, so you left out idle but the massive dislocation that happened from all the studies going on combining all the checkpoint inhibitors with the IDO inhibitors has been a reminder that perhaps even in cancer we don't have enough data before we go all in for Phase 3 but that's the arms race that exists in the market, who is going to produce the data first and taking all the risk probably was worth it if it worked.

So CD38 and PD1, that's another example of hypothetically one helped the other but it was hard to prove outside of the clinic, so you have to go to the clinic and it failed. Remember, the checkpoint inhibitors is including pembrolizumab from Merck a year ago this time failed and our partner with AstraZeneca durvalumab failed in myeloma because of toxicity.

Ronny Gal

So the question is, why do you want to go into this road?

Mark Alles

No, the backdrop is clear line. Checkpoint inhibitors work in solid tumors. We decided that we did not want to be the company that did not have a research tool that was very similar to the profile Opdivo from a clinical datapoint. There are hundreds of patients who have been treated with 317 and if you compare which is of course always the risk but if you compare the data, it looks like nevo [ph]. So the question really for us isn't what to do with it, it's -- we're now energized on the fact that multiple mechanisms in combination have failed which means our ability to innovate on that backdrop is wide open. I was worried we did the deal a year ago and the window would shut and now you'd be doing triplets and quadruplets, all of a sudden we're back to single agent and the whole world is open again to mechanisms that would work better.

We think we have a unique opportunity now compared to a year ago, so it's actually better than year ago, there is another aspect to it, there is the value play in markets that are so well established by the current generation of checkpoint inhibitors 317 potentially being one of them, we get to come in as a value story. You don't always have to come into these markets where the foundational drug that is as expensive or better than something in some way. You can come in away in HCC, hepatocellular carcinoma, in esophageal cancer, you mentioned virally driven tumors, most of esophageal cancer is driven by viruses. So if you think about what we're doing with our partner, BeiGene, we're sort of going where the others maybe aren't so established or as good. Lung cancers are very, very difficult place to be but there are lot of other places where we can go where our opportunity is almost as good if not as good, and then the question is what do we do in the broader market. We love the idea of developing 317 as a single agent and have a value play around the world; then the combination strategy comes through even better, the novel agent is the more expensive part of the cocktail.

So it's early for us, but we're very excited about our optionality on the back of unfortunately a lot of disappointments that you outlined including what just happened this week with Dara and PD-1.

Ronny Gal

So [indiscernible] and talk about a couple of things that are little bit closer to the market; so luspatercept. So one of the big debate with luspatercept is the size of that market, essentially would that be a drug used only in a few patients with solvent setting or is this essentially a foundational therapy in anemia? What is the case for this drug to be more -- I think you added on the $2 billion plus thought?

Mark Alles

Yes, we do.

Ronny Gal

So two questions; first of all, what needs to happen for us to get there and what are the milestones along the way, essentially what other trials would have to be done? What other markets have to be opened for this to happen?

Mark Alles

The clinical program is developing in two of those dimensions. The first is patients who have erythropoietin and more than need to go to transfusions because of ESA failures, so that's the standard for lowest MDS. We want to rescue those patients, we want to get them off of transfusions. If that's all that happens, it's massively important and it is a very viable market but we're not waiting there, we want to move upfront and in those patients who are not transfusion dependent, if we have the kind of profound relapse setting we believe and of course, we're starting the first line trial in the back of our belief and the mechanism, we could replace erythropoietin and/or transfusions as a first-line treatment for MDS patients whose hemoglobin started [indiscernible] but their hemoglobin is below normal and the trend is with MDS they would start to get worse and worse in terms of hematopoiesis, and that's very easy to detect, it's a differential diagnosis for MDS, so it's not hard.

In that context where we would become the standard to improve hematopoiesis before transfusion dependency or after to relieve transfusion dependency that's how you get to this greater than $2 billion. Now the bigger opportunity which we don't talk about at all and back to setting expectations -- I'm not suggesting that this is what's going to happen but you know the anemia market for cancer is enormous. So is this a new product that for subsets of cancer patients across the board is better than what the world has been used to for almost 25 years which is the use of erythropoietin as we've known it.

Ronny Gal

And when we will know that answer?

Mark Alles

Well, of course we're going to do the studies. We want to do and get the MDS trial which is a near-term event and then we'll gate and build the clinical profile on the back of what we learned.

Ronny Gal

CAR-T program, so one of the big debates on CAR-T is, if this will remain the salvage therapy drugs, potentially the one used as you are testing it today in patients not only an options or will it move to kind of first/second line given the promise of better efficacy and ability to deliver one in done drug. So in your mind, what has to happen for this to actually move forward? Do you want to talk about myeloma then lymphoma or lymphoma then myeloma?

Mark Alles

Starting with it is different.

Ronny Gal

Start with mostly myeloma because that's probably most interesting one really.

Mark Alles

If the profile of 2121 holds up over a larger pool of patients and more follow-up, so what do I mean by that? High remissions including MRD negative which is the deepest state of remission with an overall response rate that is north of 80% in this very, very sick population. The thought leaders across the myeloma spectrum in Europe and in the U.S. who will define the treatment of myeloma have already begun to design trials where they would compare in a randomized setting, DCMA [ph] CAR-T therapy to autologous stem cell transplantation. So induction which could be CAR-T and/or collect CD34 cells for both groups randomized patients after induction to CAR-T versus transplant. These things are being designed as we speak. So it's not a question of will it happen; the studies will happen, it's a question of when and what's the profile that will emerge.

We for our own purposes have already with our partner designed an earlier line of therapy randomized trial against PAM, daratumumab and dexamethasone. So this new third-line plus standard, so it would be bb2121 as the experimental arm with a three-drug regiment as the control arm. We've already designed that and talked about that publicly in number of times as soon as we work through the profile for the pivotal trial the karma [ph] study in relapse and it's a single approach, single arm, we would start that study; we just need a little bit more data, more time and we would start it, we will move it up.

Ronny Gal

The safety aspect?

Mark Alles

That's part of the follow-up, that's part of understanding the therapeutic index, so far the safety profile in a very sick population. Let me give you an example. So I was at with a thought leader a week ago and we were talking about his clinic which is participating in the Phase 1 bb2121 study. One site in the U.S. well understood by everyone and knows hematology in this space, in their center they have a waiting list of 200 patients right now to just go on the bb2121 trial. The last patient who is accrued to this study had a median of 20 prior treatments for myeloma. I did the same thing, just for everybody who is not here, Rony [ph] just put his head back and his eyes went like 5x normal the size. So the reason that's important is because first of all, myeloma patients are living a long time; second, these patients are eligible in this very, very sick window to go on the trial.

So why am I saying this? Because as soon as we have enough patients that site will move it up for commercial patients. Cash paying patients, the reimbursement, it won't necessarily discriminate line of therapy. The market will allow for that to happen just like it does for any other cancer therapy. So in '19, I think here it is pretty straightforward. We see the upfront treatment of non-Hodgkin's lymphoma as largely a medical need. So when we think about our shop, the robust trail that we're running is going to inform us whether the sale of origin approach actually makes a big difference in how to think about newly diagnosed myeloma, that's how we're going to inform the world about does it make a difference, whether you're doing CD19 directed therapy or some other therapy. So that's an important study coming late this year.

In the relapse setting, patients just don't do well at all. So this is why we have heals [ph] for augment because it's in the relapse setting using rituxan [ph] as the control. We know the profile of that single agent and I would just highlight for you that as Asco this weekend, the results of the relevance trial; so this was rituxan versus R-CHOP upfront while it wasn't enough for us to go into a formal regulatory approach, it was selected for presentation at Asco. So I think investors and the community at large of doctors will look at that dataset and again ask a question, is the B-cell lymphoma upfront a mathematical need versus the relapse setting.

So our view with CD19 directed therapy is to make it destandard in the relapse setting and then situationally look for populations upfront but not an aggregate of newly diagnosed B-cell lymphoma, there is no reason to do that. R-CHOP cures about 30% of the people. Why would someone try to do better than that? It's not possible.

Ronny Gal

So before we close, we're just at the hour. If anybody has got one final question they want to throw up for Mark. Alright, Mark, thank you very much.

Mark Alles

Thank you, pleasure. Thanks everybody.

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